Economics of Supplemental Feeding with Pasture-Based Systems

Consider milk and feed prices, substitution rates, and expected yield and component responses when deciding how much supplemental feed to offer.
Economics of Supplemental Feeding with Pasture-Based Systems - Articles

Updated: August 8, 2017

Economics of Supplemental Feeding with Pasture-Based Systems

Determining the optimum amount of concentrates or supplemental forages to feed to achieve the most profitable milk production response by lactating cows depends on several factors. This paper discusses the influence of milk and feed prices, substitution rates, and expected milk yield and component responses. Long-term effects on body condition, herd health, and reproductive performance also merit consideration.

A common question of dairy managers relates to the optimum amount of concentrates and/or supplemental forages to feed to achieve the most profitable milk production response by lactating cows. Some of our producers examine the "New Zealand" system, where little to no concentrates are fed, and think about adopting this system. To make a decision on how much supplemental concentrate to feed depends on the following:

  • Price of milk and the price of supplemental concentrate (milk:feed price ratio, M:F).
  • Substitution rate of concentrate for pasture.
  • Expected milk yield response to supplementation.
  • Production of milk components (fat and protein).
  • Long-term effects on body condition, herd health, and reproductive performance.

Pasture as the Only Feedstuff (The "New Zealand System")

Studies from New Zealand and Ireland indicate that when high quality pasture is the only feedstuff, lactating cows can be expected to consume 35 to 40 lb of dry matter (DM)/cow/day. This amount of intake may support 45 to 55 lb of milk in early lactation based on the estimated energy intake. However, body condition loss should be monitored. In studies that were conducted at Penn State, high genetic cows fed only high quality ryegrass pasture consumed 42 lb DM/day and produced 64 lb milk/day. However, cows were still mobilizing body flesh to produce this amount of milk. We think that 39 to 42 lb of DMI/day is about the maximum DM that a cow can consume from pasture with excellent pasture management.

Why do cows continue to lose body condition and weight? Basically, the high genetic merit cow has the "drive" to produce milk, and when she does not consume adequate energy compared to energy output in milk, she loses body flesh. High genetic merit cows require more nutrients than they can obtain from pasture. The energy required for the activity to walk to and from pastures is often not considered when feeding supplements and in the body condition loss with pastured cows. The energy required for activity including walking to and from the milking center and for eating activity associated with grazing may be 12 to 15% above the maintenance requirement for non-grazing cattle. For example, a grazing cow that walks 1.5 miles/day requires about 3 lb of supplement to provide energy for activity. If she walked 3 miles, then about 5 to 6 lb of supplement is needed per day.

Substitution Rate

When supplemental grain is fed, pasture DMI decreases as concentrate substitutes for pasture. This is defined as substitution rate, a term used to describe the relationship between concentrate allowance and total DMI. For example, if a cow reduces pasture DMI by 1 lb for each 1 lb of concentrate DM fed, the substitution rate is 1.0. If a cow maintains full pasture DMI, the substitution is 0, which seldom occurs. A summary of published research and of our studies at Penn State University along with a recent study in Northern Ireland indicated a substitution rate of 0.4 to 0.6 is expected with high producing cows grazing good quality pasture. Feeding 1 lb of concentrate will reduce pasture intake by 0.5 lb, thus total intake is increased. The increased energy intake with a 0.5 substitution rate is about 0.50 Mcal/day, an amount that could support about 1 to 1.5 lb more milk per day. A summary of several of our studies indicates that when adequate high quality pasture is available and when concentrate is fed in amounts "typical" for these milk production levels, total DMI approaches the DMI expected with non-grazing cows.

Milk Response to Supplement

This marginal response of milk per unit of concentrate fed follows the law of diminishing returns. The first units of concentrate fed are most profitable, and each extra unit yields a lower return. Expected milk responses of high producing cows in early lactation with increasing increments of concentrate feeding are summarized in Table 1. This is based on research in other countries and at Penn State with high producing cows. As concentrate feeding increases from 0 to 20 lb of concentrate, the milk yield per unit of grain fed tends to decrease from about 1.2 to 0.6 lb. Recent studies with U.S. genetics have reported milk responses of about 1.3 lb per 1.0 lb concentrate fed. Overall, the average milk response to feeding 20 lb of concentrate is about 20 lb of milk, or 1 lb of milk per 1 lb of concentrate fed. For example, if early lactation cows can produce 45 lb milk/day with only high quality pasture, we would expect that feeding 20 lb of concentrate will allow that cow to produce at least 65 lb of milk. The quality of pasture will greatly influence this response and the amount fed.

Table 1. Expected milk yield response of high producing cows to increasing increments of concentrate feeding.
a The average response to feeding 20 lb of concentrate is about 20 lb of milk.
Supplemental concentrate fed (lb)Expected lb milk/lb
each additional lb of concentrate
0 to 41.2 to 1.4
4 to 81.0 to 1.2
8 to 120.8 to 1.0
12 to 160.6 to 0.8
16 to 20a0.4 to 0.6

Marginal Profitability

The expected marginal profit response to increasing concentrate feeding with the substitution rate and milk yield response previously discussed is seen in Table 2. We need to include the milk:feed price ratio (M:F), or the price of one lb of milk and one lb of a 16% protein concentrate mix. As concentrate is fed, pasture DMI decreases and total DMI and total feed costs increase. With the assumption that the marginal milk yield decreases with increasing concentrate fed (Table 1), the marginal response to each 4 lb of supplement decreases from $0.39 to $0.13 when supplement is increased from 0 to 8 lb/cow/day (Table 2). When 20 lb of concentrate is fed, the marginal return to concentrate did not increase at 20 lb vs. 16 lb of concentrate/cow/day. Dairy producers can include their own price of milk and concentrate to determine the marginal profitability of supplementation.

Table 2. Expected economic response (early lactation) to supplemental concentrate feeding (US dollars).
aPasture cost - 0.03¢/lb DM.
b
Concentrate cost - 8¢/ lb DM.
c
Assume substitution rate of 0.5 (1 lb concentrate fed with 0.5 lb decrease in pasture DMI).
dMilk price - 13¢/lb of 3.5% fat milk. Milk:feed price ratio of 1.65:1.
eIncome minus feed cost.
fDoes not consider long-term benefits on body condition and reproductive performance.
PastureaConcentratebTotalMilkdINC-FCeMarginal Response ($)f
DMI (lb)Cost ($)DMI (lb)Cost ($)DMI (lb)cFeed Cost ($)(lb)($)($)
381.1400381.14455.854.71
361.084.32401.40506.505.100.39
341.028.64421.6654.57.085.420.32
320.96120.96441.92587.545.620.20
300.90161.28462.18617.935.750.13
280.84201.60482.44648.325.880.13

With the typical milk:feed price ratio close to 2.0:1 in the USA, (1.65 was used in this example), it makes economic sense to feed up to 16 to 20 lb of supplement daily to high genetic merit cows. When the M:F ratio approaches 1.0 or less, which it does in New Zealand and other countries, then concentrate feeding is not profitable, except perhaps when targeted for early lactation, high genetic cows. Typically, the milk:feed price ratio in New Zealand is less than 1.0. In the example, if the milk:feed price ratio decreases to below 1.5:1, then we may want to reduce the maximum of concentrate to 12 to 14 lb/cow/day, with target feeding of early lactation cows. Guidelines of expected profit responses with changing milk:feed price ratios are in Table 3.

Table 3. Guidelines for a milk and profit response to concentrate supplementation of pastures.
Milk:feed supplement price ratioExpected lb milk response/lb concentrate
Early LactationMid Lactation
1.00.6 to 0.8
>1.50:1ProfitProfit
1.25:1ProfitBreak even
1.00:1Break evenLoss

The "bottom line" is that grain feeding of high genetic cows on pasture results in higher total DMI, which translates into higher milk production, improved body condition, and improved income over feed cost. The greatest benefit to grain (energy) supplementation may be long-term benefits in improved body condition, and in turn reproductive performance, which is not considered. Feeding up to 18 to 20 lb of grain per day will not likely lead to acidotic conditions in the rumen if pasture and forage intake is adequate. In our studies with rumen fistulated cows and in other research around the world, rumen pH seldom decreases below 6.0 with grain supplementation. Table 4 contains the concentrate feeding guidelines for a grass-based pasture system.

Table 4. Concentrate (DM) feeding guidelines for a grass-based pasture system.ab
aAssume 1300 lb body weight.
b
These guidelines are based on high quality grass pasture available in adequate quantities assuming the approximate DMI. Lower quality forages may require more grain. Maximum grain DM fed should be equivalent to about 20 lb per day. Some adjustment should be made based on body condition scores and stage of lactation. Lower amounts of grain can likely be fed when pasture contains legumes.
cGrain fed (DM basis) to milk yield on a lb to lb basis (i.e. 1 lb of grain per 4 lb of milk gives a G:M of 1:4).
4% FCM ProductionSpringSummerFall
(lb/day)lbG:MclbG:MclbG:Mc
> 80201:4 to 1:522-241:3201:4 to 1:5
7015-181:4 to 1:519-211:3.516-181:4 to 1:5
6011-131:515-181:412-141:5
508-101:5 to1:610-121:4.58-101:4 to 1:5
< 406-81:6 to 1:78-101:56-81:6 to 1:7

Feeding TMR to Grazing Dairy Cows

An alternative supplementation strategy is to feed supplemental grain and forage as a TMR. A research project at Penn State examined three different feeding strategies, 1) a typical pasture plus concentrate system, 2) a pasture plus TMR, and 3) a standard TMR. The results of this study showed that cows on the pasture plus TMR system produced about 7 to 8 lb more milk per day than the cows fed pasture plus concentrate. The reason for this increase was higher daily total DMI which in turn led to higher energy intake.

A question that may arise is, "Why feed TMR when the idea is to move away from confined feeding and feed pasture?" The answer lies in the economics; feeding TMR increases DMI and milk production and the benefit from this is higher income over feed costs shown in Table 5. The numbers shown in Table 5 are milk income and feed costs only. Other costs such as housing and fencing are not included, but in the final analysis the pTMR fed cows generated higher net income than did the pasture and concentrate fed cows. Feeding TMR to pasture-fed cows also increased component percentages, fat and protein, but more importantly increased component yields. The TMR ration fed to both groups was the same. Formulating a more nutritionally balanced TMR for the pTMR group would have resulted in lower feed costs and likely higher milk yield.

Table 5. Economic comparison of pasture plus concentrates (PC), pasture plus TMR (pTMR) and TMR only feeding systems.a
a Bargo et al., 2002. J. Dairy Sci. 85:2948-2963; Tozer et al., 2003. J. Dairy Sci. 86:808-818.
bIOFC = income over feed costs.
Feeding SystemPCpTMRTMR
Milk yield (lb/cow/day)637084
Milk components (%)
Fat3.133.353.30
Protein2.822.952.99
Gross milk income ($)7.558.8010.49
Marketing costs ($)0.540.600.72
Income/cow/d ($)7.018.209.77
Feed Expenses/cow/d ($)
Ration costs1.262.053.42
Pasture0.680.400.00
Total feed expenses1.942.453.42
IOFCb per cow per d ($)5.075.756.35

An additional benefit to feeding TMR as well as pasture is that it is possible to increase the stocking rate of the pasture. Again, other long-term benefits, such as increased body condition and reproductive rates, because of higher energy intake are not included in the analysis.

The Economics of Milk Component Changes

One concern that arises with feeding grain supplements is that the milk fat percentage tends to fall as the amount of supplement increases. However, it is most important to look at what happens to yields of components, not percentages. When supplemental grain is fed, milk yield increases and concurrently fat yield increases. Feeding supplemental grain increases protein percent and protein yield. To demonstrate the economic effects on component yields of supplemental feeding; an example is provided in Table 6.

Table 6. The effects of feeding supplemental grain on milk yield and components and the returns and costs of supplemental feeding.
aBased on February's Order 1 component prices and producer price differentials for Mt Holly Springs, PA.
b
IOFC = income over feed costs.
Base situationSupplemental grainDifference
Milk yield (lb)5065+15
Milk fat percentage3.52.95-0.55
Milk fat yield (lb)1.751.913+0.163
Milk protein percentage2.82.9+0.1
Milk protein yield (lb)1.41.885+0.485
Amount of grain fed (lb)416+12
Pasture intake (lb DM)3630-6
Total milk incomea (A)$5.74$6.88+$1.14
Cost of grain ($0.08/lb) (B)$0.32$1.28+$0.96
Cost of pasture ($0.03/lb) (C)$1.08$0.90-$0.18
IOFCb (A-B-C) per cow per day$4.34$4.70+$0.36

In the case shown, milk fat percentage fell by 0.55%, but fat yield increased by 0.163 lb, this increase in yield contributed to the higher return per cow in this example. Also, the higher milk and protein yields helped to offset the increase in feed costs caused by the higher level of supplemental grain. The milk prices in this example were relatively low compared to the average. If prices were closer to average, then the difference in IOFC per cow between the base situation and the supplemental grain feeding case would be a lot larger. Producers can enter their own milk, fat and protein yields and component and feed values to determine the economics of feeding supplemental grain.

Closing Comments

In the analyses and examples used above many factors were not included, such as increased body weight leading to perhaps better reproductive performance and changes in stocking rates; these factors can influence the profitability of supplemental feeding. Typically, the factors not accounted for increase the profitability of the dairy system, as cows are in better condition in next lactation, have shorter calving intervals, or it is possible to carry more cows per acre and, at higher returns per cow, return more profit to the system.

Published as pages 47-52 in proceedings from "Nutrition of Dairy Cows on Pasture-Based Systems" held March 31, 2003 in Grantville, PA.